Nvidia Corp. NVDA stock fell nearly 4% in premarket trading on Friday amid reports of an antitrust investigation by the U.S. Department of Justice over allegations of monopolistic practices in the AI chip market.
What Happened: The DOJ has commenced an inquiry into Nvidia following complaints from its competitors about potential misuse of its dominant position in the AI chip market, The Information reported on Thursday, citing people involved in the discussions.
The investigation is focused on whether Nvidia pressured cloud providers to purchase multiple Nvidia products.
The probe also examines whether Nvidia charged customers higher prices for networking gear if they wanted to buy AI chips from rivals such as Advanced Micro Devices AMD and Intel Corp. INTC. Nvidia currently holds approximately 80% of the AI chip market.
“We compete based on decades of investment and innovation, scrupulously adhering to all laws, making Nvidia openly available in every cloud and on-prem for every enterprise, and ensuring that customers can choose whatever solution is best for them,” an Nvidia spokesperson told Reuters.
Progressive groups and Senator Elizabeth Warren (D-Mass.) have advocated for the DOJ to investigate Nvidia over competition concerns. These groups have been critical of Nvidia’s bundling of software and hardware, according to the report, a practice that French antitrust enforcers have also flagged.
Why It Matters: The DOJ’s investigation into Nvidia is part of a broader regulatory focus on the AI sector. In June, it was reported that the U.S. Justice Department and the Federal Trade Commission had finalized an agreement to facilitate potential antitrust probes into the dominance of AI industry leaders, including Microsoft Corp. MSFT, OpenAI, and Nvidia.
On Wednesday, former House Speaker Nancy Pelosi (D-Calif.) disclosed the purchase of additional Nvidia shares, while selling a portion of her Microsoft holdings.
Moreover, Nvidia’s market value has seen a meteoric rise, with predictions from prominent investors suggesting it could reach nearly $50 trillion within a decade. This bullish outlook is driven by Nvidia’s pivotal role in the growing demand for AI chips, which are essential for training and operating advanced generative AI models.
Despite U.S. export controls, Nvidia is projected to generate $12 billion in China this year through the sale of AI chips designed to comply with these restrictions. This underscores Nvidia’s strategic maneuvers to maintain its global market presence.
Price Action: Nvidia’s stock closed at $109.21 on Thursday, down 6.67% for the day. In pre-market trading, the stock continued its downward trend, falling an additional 3.53%. Despite this recent decline, Nvidia’s stock has experienced significant growth year to date, rising by 126.72%, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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